Auguries: Gold ♥ Obama

Gold was up (at press time) $49 (+2.9%) for the week to $1,726, and silver was up $1.37 (+4.4%) to $32.24. GoldCore argued October 7, “Obama’s election means that quantitative easing, ultra-loose monetary policies and currency debasement are set to continue in the world’s number-one economy, which is bullish for gold—and indeed silver.”

One hopes that no Auguries readers made the mistake of betting money on the Presidential prediction that appeared in this space last week. Your columnist should have read his own analysis more carefully before venturing into wish fulfilment.

Hurricane Sandy has become a government-mediated FUBAR of almost-Katrina proportions. After running out of water, FEMA has now fled the scene due to “weather.” Yet an NBC exit poll shows that 68% of Obama voters agreed that “Obama’s hurricane response” was an important factor in their decision. And the nature of his response? He showed up, looked concerned and was photographed with the Governor of New Jersey. Welcome to the United States of Reality Shows. Expect sales of bomber jackets to soar.

Blogger Vox Day, who was similarly wrong about the election, confessed, “I think it is safe to conclude that I should stick to economics and societal predictions rather than political ones. Polling clearly trumps pattern recognition with regards to the latter.” Seconded. He was wrong for the same reason as this column: “Twenty years ago, or even 10 years ago, a president who eked out 1% quarterly GDP growth (which is artificially inflated by a $1.2-trillion ‘G’ spending deficit) and jobs numbers that don’t even keep up with population growth would be doomed.” Oh, well. Obama promised “change,” and by God, he’s delivered it.

In any event, the sun will still shine; birds will still sing; and precious metals will continue to appreciate. Stocks perhaps not so much—the Dow Jones is down 434 points since Tuesday. Jim Rogers told CNBC that Obama’s triumph is “not going to be good for you, me or anybody else.” Except for one group of investors. “Today, I’m going to short more bonds, more US government bonds. I’m going to buy more commodities, both base metals and precious metals. It looks to me like money printing is going to run amok now; spending is going to run amok.”

Jonathan Ratner reports in the Financial Post November 8 that Edel Tunny of UBS concurs. “Now that roadblock [of electoral uncertainty] is removed, gold investors can refocus with more clarity and pre-position themselves ahead of the important event risks up ahead, not just of a fiscal nature but also monetary policy…. Gold could not have asked for a better outcome. Now it’s up to buyers to step up to the plate.”

At Gold-Prices.biz, Bob Kirtley sings from the same hymnal: “The so-called fiscal cliff will not be met head on; the approach will be one of extending some of the tax cuts now in place and a watered-down strategy of fiscal prudence. Budget ceilings will come and go, and the deficit will grow ever larger…. The demise of the dollar and other fiat currencies brings with it an increase in the price of hard assets.”

The chorus grows louder at the Gold Report November 7. Jeffrey Nichols, managing director of Precious Metals Advisors: “The best of all possible worlds for gold investors.” Adrian Ash of BullionVault: “Selling gold short—in anticipation of further falls—has proved a foolhardy move plenty of times in the last five years of crisis. And Obama’s second victory has so far only confirmed gold’s jump against a backdrop of everything else sinking.” Peter Cooper of Arabian Money: “With President Obama safely back in the White House, investors in precious metals can justly feel that the President’s promise that ‘The best is yet to come’ is aimed at them.” Axel Merk of Merk Investments: “The Fed’s increased emphasis on employment is here to stay. The market rewards this certainty by bidding up gold, selling off the dollar versus all major currencies.” Chris Vermeulen of the Gold and Oil Guy: “Gold looks ready for a run to $1,800.” Jack Farchy of the Financial Times: “The vote for a continuation of the status quo…could set the scene for a strong gold rally toward the end of the year, analysts and traders said.”

Even as goldbugs praise Obama 2: Bernanke’s Revenge as “The feelgood movie of the year,” precious-metal miners remain dangerously cash poor. Peter Koven writes in the Post November 5, “As economic uncertainty increased last year, investors became more risk-averse and demand for junior mining equities evaporated. That made it extremely tough for these companies to stay active.” John Gravelle of PricewaterhouseCoopers does note some hopeful signals, however, such as “an increased willingness among juniors to look at creative financing alternatives, including strategic investors, streaming or royalty transactions and selling one project to finance another.”

With President Obama safely back in the White House, investors in precious metals can justly feel that the President’s promise that ‘The best is yet to come’ is aimed at them”—Peter Cooper

And now to cases. Koven reports November 8 that Andina Minerals V.ADM has agreed to a friendly takeover by Hoshschild Mining. The bid is $103.4 million, $0.80 per share: “That is double Andina’s closing price on Wednesday, though it comes after a year of poor stock performance… Andina shares traded above the offer price early this year, and were above $5 back in 2007 and early 2008” (currently $0.78) and November 5 that “A power-supply agreement has finally been reached for the massive Oyu Tolgoi mine in the Gobi Desert. This is very good news for Turquoise Hill Resources T.TRQ.” As a result, Tony Robson of BMO Capital Markets has set a target price of $13.75 (currently $8.58).

On November 8, Canaccord maintained the price target for Kinross Gold T.K at US$13 (currently C$10.16), citing 3Q production, above-estimate earnings per share and the company likely meeting 2012 guidance.

On November 7, Canaccord set an initial target for Brigus Gold T.BRD of US$2.10 (currently C$0.99), citing “attractive valuation, unrecognized growth potential and superior gold price leverage” and its opinion that the company is a takeover possibility.

On November 6, Canaccord maintained Alexco Resource T.AXR at $9 (currently $4.17), arguing, “The increase in throughput and decline in costs at Keno Hill in 3Q are a solid demonstration of the potential to ramp up throughput and production [there].”

On November 2, Canaccord maintained First Quantum Minerals T.FM at $21 (currently $22.14), noting that it “has continued to report good results during 2012 after a series of misses during 2010 and 2011” and maintained New Gold T.NGD at US$18.50 (currently C$11.04), noting “a slight miss to [3Q] earnings estimates but a strong ramp-up in throughput at New Afton [and] valuation-upside potential associated with the Blackwater project.”

At the Gold Report November 7, Jay Taylor, editor-publisher of J Taylor’s Gold, Energy & Tech Stocks, likes Sandstorm Gold V.SSL (“My No. 1 pick all year and would stay No. 1 especially in a more inflationary environment”), Dynacor Gold T.DNG (“could well double its production over the next two to three years”), Eurasian Minerals V.EMX (“a lot of cash on its balance sheet and major companies spending major dollars to find world-class deposits. If just one hits…this stock will be a big winner”), OceanaGold T.OGC (“I own this company because of its Philippine prospects”), Aurizon Mines T.ARZ (“more than $200 million in working capital and lots of growth prospects in Quebec”), Alexco T.AXR (“has only $32 million in working capital but lots of exploration potential and new projects coming onstream”), Bravada Gold V.BVA (“[Its] stock is at $0.055 cents right now and is very undervalued. It’s very small, but it has good management”), Aurvista Gold V.AVA (“It has an open-pittable resource, just under three million ounces, with lots of exploration potential”), Solvista Gold V.SVV (“[It] has deep pockets behind it”), Urastar Gold V.URS (“[Its] La Juliana gold project in Mexico…is small but very strategically located in the middle of Alamos Gold’s T.AGI Mulatos operation”) and Northern Freegold V.NFR (“a low CAPEX number relative to a six-million-ounce gold deposit”).

And at Seeking Alpha November 7, Bret Jensen is also sweet on Aurizon T.ARZ. Four reasons: geopolitically stable properties, a median price target from six analysts of $6 (currently $4.08), 2013 sales growth and that $200 million in cash.

Finally, MSNBC neurasthenic Chris Matthews apologized for saying of Hurricane Sandy, “I’m so glad we had that storm last week… [It] brought in possibilities for good politics.” One wonders why he felt the need to express regret for a belief held so strongly by so many. It certainly wasn’t because he cares what others think of him. If that were the case, he would have retired in shame to a monastery years ago. Matthews blamed exhaustion, but the real reason is that he had alluded imprudently to Poseidon’s role in Obama’s re-election. You do not want to get on the wrong side of Poseidon. One example: you know how so many men of Matthews’ age come to grief after falling in the bathtub? Those aren’t accidents.